Central bank chief revives old dispute

A ROW over the leadership of the European Central Bank clouded the euro launch after its president, Wim Duisenberg, insisted that he would remain in charge for at least another year.

The Dutch central banker has reopened a long-running dispute by confirming that he has no intention of stepping down early this year to make way for a Frenchman half-way through his term in office.

At a press conference in Frankfurt, he said "Oh yes!" when asked if he intended to carry on through the first year of the euro's existence as a cash currency.

Mr Duisenberg, 66, was given the job as ECB president, technically for an eight-year term, after a furious row with Paris during a summit on the euro in Brussels in 1998.

An agreement was reached after President Chirac claimed to have extracted a "gentleman's agreement" from Mr Duisenberg that he would step down after notes and coins came into use. Mr Duisenberg has denied such a commitment.

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At the weekend he told Dutch television: "I won't step down in the near future. I like what I'm doing." Yesterday he insisted that it was his decision alone when he would go.

The French and German finance ministries, keen not to allow the dispute to overshadow yesterday's festivities, both refused to comment. France had hoped to install Jean-Claude Trichet, head of the Bank of France, and architect of the franc-fort policy that prepared France for the rigours of the euro.

But Mr Trichet's succession has been thrown into doubt because he is under judicial investigation in connection with the collapse of the former state-owned bank Credit Lyonnais.

Sources in Brussels said Mr Duisenberg was doing a favour for Mr Trichet by keeping his seat at the ECB Eurotower warm for him until the investigation was finished.

It would be a disaster for the ECB if the choice of a new president fell open to all-comers in the next few months, inviting another ugly spat between member states and jeopardising the bank's image of independence.

Analysts, many of whom have criticised Mr Duisenberg's stewardship of the bank and attacked him for making public relations blunders that have contributed to the euro's weakness, said his determination to resist the French pressure sent a positive signal about the independence of the bank.

"The ECB doesn't want to be perceived as an institution controlled by the politicians," said Rob Hayward, senior currency strategist at ABN AMRO. "If the market perceived it as just being a political appointment it has to be negative for the euro," he added.

Arguments over the leadership of the central bank get to the heart of one of the most divisive debates over how the euro should be run. Mr Duisenberg, although a Dutchman and for many years head of his country's central bank, is a banker in the German mould.

He believes that the euro will reach its potential only if the bank resists political influence and sticks to its primary task of ensuring "price stability" for the euro-zone.

The French, however, have traditionally pushed for more involvement by politicians in a European economic government.